Notley energy report card: Alberta Party gives B- and F grades

Alberta Party

Alberta Party leader and MLA Greg Clark

“We can’t simply, like united right would have us believe, just turn back the clock and hope everything will be okay.” – Clark

With the spring legislature session recently ended and the school season drawing to a close, it’s a great time for opposition parties to hand in report cards on the Alberta government handling of energy policy so far.

Over the next few weeks, we’re sitting down with party leaders, energy critics and MLAs of the four major parties to see how they think the Alberta government has handled different aspects of our energy economy. The good, the bad and the downright ugly.

We’ll start with the new kid on the block, the Alberta Party leader and Calgary MLA Greg Clark.

The interview has been slightly edited for clarity.

alberta party

Follow Teo on LinkedIn and Facebook!

Jude: What’s your take on the Oil Sands Advisory Group’s recommendations?

Greg: I think the 100 megatonne cap is reasonable. I think it will have the effect of spurring innovation, which is already happening in Alberta’s oil sands sector.

The (Oil Sands Advisory Group) panel make up itself, I have to say, I was glad to see the terms expire for certain members. I think diverse voices are important but those diverse voices should fundamentally agree that oil sands development is a good thing. And I don’t know if that could be said for all members of the previous panel.

Jude: What’s your take on the energy minister being able to kill a project if it gets anywhere close to the cap?

Greg: If Alberta gets anywhere close to the 100 megatonne cap, our industry has expanded tremendously and we will be back in a time of having challenges of – human resource challenges, cost challenges, all of the boom time challenges we had previously.

I would describe the Alberta party’s position on energy development as it compares to the NDP as nuanced. Certainly, we don’t agree with everything that they’ve done, there’s no question we have some grave concerns especially in the electricity file.

On the oil and gas side, Alberta has to decide whether we’re going to be future-focused on continued hydrocarbon development or if we want to just hide our eyes and pretend the world isn’t changing around us, like the Wildrose would have us do.

I think our oil and gas industry is incredibly technologically advanced and innovative.

Alberta is solving the problems of tomorrow and in doing that we’re going to enable the continued growth and success of traditional oil and gas AND create the jobs of tomorrow. So despite a lot of the doom and gloom, and rightly so, it’s been a very challenging time, I am optimistic about the possibilities.

Jude: Can you point specifically to something the Alberta Party would do differently?

Greg: It’s very difficult for small and mid-sized producers with the cumulative impact of the LLR (Licensee Liability Rating) issue, linear assessment issues and the property taxes associated. It’s very difficult for those small and mid-sized operators to make a go of it.

You’re seeing the death of the small operator, and that’s the pipeline for future companies, always the way it’s been. We need to take a close look at how we can ensure that Alberta entrepreneurs continue to be able to create the small companies that turn into the big companies of the future.

They develop assets that mid-sized and larger companies can acquire, that’s always been the pipeline. I realize the world has changed, wells are far more complex and more expensive than they used to be. We’re not just drilling vertical wells anymore, but the New Democrats are missing an opportunity to ensure there’s a chance for small and mid-sized producers to make a go of it.

Jude: What would the Alberta Party do to help them? 

Greg: No, I don’t think so. I think we need to have a closer look. I’ve heard from a number of companies that are really struggling with property tax issues. I hear a real disconnect between what the Department of Energy is trying to do in terms of enabling exploration and production and what municipal affairs seem to interpret in terms of a fairly narrow interpretation of property tax assessment. What I’d like to see is a more enabling approach from all departments in government that says “Our job here is to encourage and enable responsible companies to produce and to explore, develop and to create jobs”

Jude: What about the Alberta electricity file. Do you want to expand on that a bit?

Greg: Right to the very beginning when they made the changes to specified gas emitter regulation without understanding that it would trigger the more unprofitable clause (Enron Clause). They ought to have known that. I personally think that they did know it and just ignored the fact or didn’t fully appreciate the advice they were being given.

Once the clause was triggered, they had a choice and they made the wrong choice. What they should’ve done was accepted back the Power Purchase Agreements. Very likely they would’ve accepted back the PPAs and allowed the balancing pool to run them as economically as possible. And that would’ve meant the loss was in the $400 million to $600 million range.

alberta

Follow Teo on LinkedIn and Facebook!

Instead, they initiated four lawsuits, one of which continues, the Enmax lawsuit, and all the while, literally billions of dollars are draining from the system. The balancing pool went through a substantial surplus to at least a billion dollars in deficit.

The NDP had to pass legislation to backstop the losses of the balancing pool. It’s surprising it’s not a bigger scandal than it’s played out to be. I mean, we are literally seeing $2.5 billion in losses that are absolutely unnecessary. So, the NDPs approach to electricity has been haphazard, irresponsible, piecemeal and while I support phasing out coal-fired power, I think it’s the right thing to do, but we need to do it responsibly. And the government needs to understand its obligation in doing that.

Instead of threatening companies with orphaned assets and using the power of government to sue private industry for frankly changes government made without full knowledge or understanding of their contractual obligations, they should own up to that and have understood that they have responsibilities or obligations under those contracts.

It started off on the wrong foot and every step of the way they seemed to stumble. This past spring, the NDP passed a bill to cap retail electricity rates. Well, that doesn’t mean retail electricity rates won’t go up, it just means that the end consumer doesn’t see the impact of that on their bill. 

But they’re still paying, taxpayers are still paying the bill either through increased  service costs from the money that’s borrowed to backstop it or through taxation to offset those losses. Frankly, it’s deeply cynical, the way they approached it and I’m afraid it’s going to get worse before it gets better.

Jude: Back to the report card.  So, thinking about the royalty review, the electricity file, the carbon tax, all the energy policies, what kind of grade on a report card would you give them? 

Greg: It’s challenging because there are so many pieces to that. I guess on the oil and gas side of things, I guess maybe I’d give them a C+, or a B-. I guess it hasn’t been as terrible as it could’ve been and I think we need to be realistic about that. They’ve really failed on the electricity file, it’s an F, and the impact of their mishandling of the electricity file are going to be felt in this province for decades.

Jude: Is there any way to walk back the electricity file?

Greg: Yeah, I ask myself that question all the time. As the Alberta party, we pride ourselves not just on opposing but also on proposing ideas. It’s going to be challenging. As far as renewables go, I think the rec process that they put in place seems to be a good process.

Remains to be seen while that first part of the process wraps up here shortly. Whether they’ve done enough to incentivize combined cycle gas to offset the instability of renewables, we’ll see. I’ve heard different perspectives on whether or not they’ve in fact done that that well.

So, on the renewables side, I actually think that it’s been a reasonable process based on some good learning from other jurisdictions. But on phasing-out of coal fire power, it has been a real disaster. And there are better ways of doing it without question. The renewables process, their 30 per cent is somewhat arbitrary.

It may be too high, there’s some work done by EDC Associates which shows that a 25 per cent target may be more cost-effective. Next 5 per cent may create tremendous instability and add a great deal of cost to Alberta’s grid. So, I would certainly be flexible on whether 25 per cent is a better target than 30 per cent.

Jude: Regarding the PPAs, the PCs introduced the deregulated market, do you think that was a good idea in the first place?

Greg: I think our whole deregulated system was having the desired effect. It was sending market signals to build generation and that was what was happening. And as a result, we ended up with actually too much generation and so prices went down. So there’s a market signal to not build new generation and then it seemed to be working reasonably well.

Certainly had it’s ups and downs over time but it was better than half-hazard way NDP had gone to a capacity-based market. Having said that, a capacity market is perhaps not a bad compromise given everything else that’s gone on. Could’ve been worse but the changes they brought are not as well thought out as they could be.

Jude: In terms of the carbon tax, the Alberta party is for it but in a different way?

alberta partyGreg: We would transition a carbon tax to being revenue-neutral by cuts to personal and corporate income tax as well as innovation tax credits. We would also fix the rebate program. We need to make sure that only people who genuinely need the rebate get it.

We would also adjust the rebates to equal the annual estimated carbon tax cost. As it stands now, a lot of people get more money in rebate than they actually spend in carbon tax. A flaw in the design of the system. If I’m being cynical, it’s a way of buying votes with their own money and that’s wrong reason.

If you’re actually making money on the carbon tax, you don’t have an incentive to consume less, that’s the purpose of a carbon tax. That’s the mechanism a carbon tax uses, it makes consuming energy or producing carbon more expensive so you have incentive to save. They’ve been unfortunately very political in how they’ve rolled out the carbon tax. A carbon tax can be a good policy but way they’ve gone about it may have turned Albertans off the idea.

Jude: Is there anything you wanted to touch on that we may have missed?

Greg: Only other thing I’d say is about Energy Efficiency Alberta and those rebate programs can work but I want to see measures of success, how do we know it’s working? What’s government objective in reducing carbon emissions as a result of their energy efficiency programs?

They’ve told us, “It’s a good thing.” It probably is, but why not produce data to show the program is working. Otherwise, Albertans could surmise that it’s just a cynical political exercise. Good data makes good decisions, and I would like to see a lot more measures published regularly about the impact of the carbon tax and the overall climate leadership plan.

It can and should work. These are the right levers to be pulling and there should be no reason why the government doesn’t produce data to show it’s working. If the data doesn’t show that, then we need to do something different. And that’s a real concern I have with this government, their measurements are insufficient. I like to say, it’s a fact whether we measure it or not, so why not measure to manage it better.

Jude: What about the rumours the Alberta Liberals and Alberta Party might be uniting?

Greg: I dont think we’re going to unite as parties. I think the Liberals are on their path and we’re on ours. They’ve got a trajectory that is flatter or declining, our trajectory is definitely up and it’s a very positive thing. I think in next election I think you’re going to see three strong parties: a right, a left, and a centre. The Alberta Party will be centre, which says that climate change is “not an existential threat to our way of life” but perhaps the single greatest market opportunity of our lifetime if we do it right.

And we can’t simply, like the united right would have us believe, just turn back the clock and hope everything will be okay. The NDPs, through their carbon tax rebates, are focused only on between now and next election. The Alberta Party is only party truly focused on creating future prosperity. it’s those sorts of ideas and optimism that’s attracting people to us and that’s why we’ve seen so much growth.

alberta party

Follow Teo on Linkedin and Facebook!

Posted in: Jude on Alberta

Post a Comment